NBN Co taps Ericsson, Silcar for billion dollar tenders

Carrier vendor Ericsson and construction company Silcar have been awarded two highly coveted and long anticipated National Broadband Network (NBN) tenders, signifying a turning point for the project.

Ericsson has picked up the network's fixed wireless rollout, while Silcar has the job of rolling fibre to a slew of second-release network sites.

The government-owned company building the network had been criticized in recent weeks after it withdrew from its first round of construction tenders citing excessive prices. By adjusting its own requirements and negotiating a deal acceptable to one network builder, it's pulled off a coup: the company has put in place a regime that will make it difficult for other construction companies to inflate their prices.

Silcar, a joint venture between Siemens and Theiss Services, nabbed a construction deal worth a potential $1.12 billion over four years. The first phase contract of the construction and deployment of the fibre optic cable network was valued at $380 million over the next two years, with an option of a two year extension of $740 million.

Silcar's build covers Queensland, New South Wales and the ACT, and represents almost 40 percent of national construction activity planned over the next two years.

If both the rollout and the electoral cycle run to schedule, it will give the network a momentum that would be difficult and unpopular to reverse in the event of a change of government.

NBN Co corporate services head Kevin Brown said “today’s agreement with Silcar, coupled with the signing today of Ericsson to deliver a fixed-wireless service, combined with the earlier announcements of our interim satellite service and the IT contract for our operating and business support systems, means most of the major building blocks are now in place to deliver a high-speed national broadband network across the country.”

It has yet to sign a pivotal infrastructure access deal with Telstra, nor finalise all its supplier arrangements.

Brown said that NBN Co remains committed to finalising a definitive agreement with Telstra shortly, before releasing a more detailed construction timetable.

The Silcar agreement follows eight weeks of intensive negotiations and represents what Brown described as “a competitive and acceptable benchmark for design and construction across the project.” The final detailed contract will be concluded by 17 June 2011.

Brown said that discussions are continuing with a core group of preferred construction suppliers for the rest of Australia and second release sites, and he expects to finalise those “in months”.

“We have always said we would strive to deliver the best possible deal and achieve the lowest cost for taxpayers. Having reached this position, we have every reason to believe we will bring in the remaining locations across Australia at acceptable prices and on very competitive terms,” Brown added.

Silcar's contract includes nine of the 19 NBN Second Release Sites previously announced by NBN Co – extensions to existing works in Kiama, Townsville and Armidale and new sites in Springfield Lakes, Toowoomba and inner northern Brisbane, Riverstone in western Sydney, Coffs Harbour, and Gungahlin in the ACT.

NBN Co has now executed over 100 tenders with a total potential value of approximately A$7 billion.

In a revival of local fortunes for the Swedish vendor, Ericsson has snared a ten year, A$1.1 billion deal to build and operate the fixed-wireless component of the National Broadband Network.

Using LTE in point-to-point configurations, the wireless rollout will catch users between the NBN fibre footprint and the most remote 2 percent of Australian households, which will have to make do with satellite services.

The Ericsson deal positions the vendor in the box seat for LTE deployment in the country after securing significant LTE deployments with Telstra and Vodafone Hutchison Australia in recent months.

The contract wins come at a time when Ericsson staff reserves are at an all time low following over a year of rationalization, and will most likely see the vendor teaming with supplier partners to complete the deployments.

The mammoth NBN Co deal includes the supply, operation and maintainence of the LTE radio access, evolved packet core backhaul transmission, and business support systems, including service activation, management and assurance as well as network performance and capacity management. Ericsson says it has already started work on building the LTE TDD network, which will be for fixed wireless use and is due to be completed by 2015. Services are scheduled to launch commercially in mid-2012.

The network will be deployed in the 2.3GHz frequency band with downlink speeds expected to max out at 12 Mbps coupled with uplink speeds up to 1 Mbps.

Meanwhile, the absence of embattled NBN Co chief Mike Quigley at the announcement was explained by his stand-in Brown, who said that Quigley was on a ‘long-planned’ family holiday . Questioned on whether he might be in the top job in six months time, Brown said Quigley was “the man of the moment and the man for the job and after the last two weeks, he is welcome to it.” ®